Chap 1: case general motors in china (tr35).......................................................................

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Chap 1: Boeing’s global production system....................................................................... 4
Chap 2: “Did Walmart Violate the Foreign Corrupt Practices Act?”................................. 6
Chap 2: Transformation in Saudi Arabia (closing case).....................................................7
Chap 3: “India’s Economic Transformation........................................................................9
Chap 3: Brazil’s Struggling Economy (closing case)...................................................... 11
Chap 4: Turkey, Its Religion, and Politics.......................................................................... 13
Chap 4: China and Its Guanxi............................................................................................. 14
Chap 4:China, Hong Kong, Macau, and Taiwan (Closing case).......................................16
Chap 5: Sustainability Initiatives at Natura, The Body Shop, and Aesop ( closing case).
17
Chap 6 Trade Wars Are Good and Easy to Win (closing case)........................................19
Chap 6: “Is China Manipulating Its Currency in Pursuit of a Neo-Mercantilist Policy?...
20
Chap 6: Moving U.S. White- Collar Jobs Offshore.”......................................................... 22
Chap 7 : The United States and South Korea Strike a Revised Trade Deal....................23
Chap 7 : Protecting U.S. Magnesium................................................................................. 26
Chap 8 : Geely Goes Global................................................................................................ 27
Chap 8 Burberry Shifts Its Entry Strategy in Japan..........................................................28
Chap 9 NAFTA 2.0: The USCMA..........................................................................................30
Chap 13: Red Bull: A Leader in International Strategy.....................................................32
Chap 13: AB InBev, Beer Globally, and Creating Value.................................................... 33
Chap 14: Walmart International (closing case) - tr463......................................................34
Chap 14: Management Focus on Lincoln Electric............................................................ 36
Chap 15: IKEA Entering India, Finally! (closing case)...................................................... 38
Chap 15: TESCO...................................................................................................................40
Chap 17: Procter & Gamble Remakes Its Global Supply Chains (closing case)........... 42
Chap 17: IKEA Production in China................................................................................... 43

Chap 1: case general motors in china (tr35)

Case Discussion Questions
1. What are the long-term prospects for the Chinese market?
The Chinese market offers robust long-term growth potential, making it a critical region for
General Motors' global strategy:
- Market Size and Vehicle Penetration: China has been the world’s largest automobile
market since 2012, with 3.64 million GM vehicles sold in 2018 alone. However,
vehicle ownership per capita in China remains significantly lower than in the U.S.
(173 per 1,000 people compared to 833 in the U.S.). This discrepancy suggests a
massive untapped market, especially as income levels rise.

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 - Economic Growth and Urbanization: The Chinese middle class is expanding rapidly,
supported by consistent GDP growth and urbanization trends. Urban populations
typically have higher vehicle ownership rates due to better infrastructure and
increased purchasing power, further driving demand for automobiles.
- Shift to Electric Vehicles (EVs): China is a global leader in EV adoption. The
government has been proactive in promoting EV growth through subsidies, tax
incentives, and infrastructure development, such as expanding charging networks.
By 2023, GM plans to launch 20 EV models in China to align with this growing
market segment. The EV market in China is growing at a pace four times faster than
in the U.S., making it an ideal environment for automakers transitioning away from
traditional internal combustion engines.
- Policy Support: The Chinese government prioritizes the automotive industry,
particularly green technology, offering additional opportunities for GM to capitalize on
subsidies and a favorable regulatory environment for EV production.
Conclusion: The Chinese market represents unparalleled opportunities for growth,
particularly in EVs, and is vital to GM’s future profitability and market share.

2. Does it make sense for GM to produce automobiles for the Chinese market in
China? Why?
Producing vehicles locally in China is a strategic necessity for GM. Key reasons include:
- Cost Efficiency:Manufacturing vehicles in China reduces transportation and logistics
costs associated with exporting from the U.S. It also allows GM to leverage lower
labor costs and benefit from supply chain efficiencies, particularly for locally sourced
components.
- Avoiding Tariffs:China imposes high tariffs on imported vehicles, with rates reaching
up to 40% during the U.S.-China trade dispute in 2018. Producing vehicles locally
allows GM to avoid these tariffs and remain price competitive.
- Proximity to Consumers:Local production enables GM to better understand and
respond to Chinese consumer preferences. For example, certain vehicle models like
the Buick Envision are tailored specifically for the Chinese market, where they
account for 80% of global sales.
- Access to Government Incentives: The Chinese government provides significant
subsidies for EV production and sales. By manufacturing EVs locally, GM can benefit
from these incentives, which are critical for maintaining competitiveness in the rapidly
growing EV market.
- Market-Specific Design:Proximity to the market allows GM to design vehicles that
cater to Chinese regulations and consumer demands, such as smaller, fuel-efficient
vehicles for urban markets or EVs for environmentally conscious buyers.
Conclusion: Producing vehicles locally in China is not just cost-effective but essential for
maintaining market share and achieving long-term strategic goals.

3. What do you think would happen if GM tried to serve the Chinese market by
exporting production from the United States?
If GM attempted to export vehicles from the U.S. to China, several challenges would arise:
- High Tariffs: Chinese tariffs on imported vehicles make U.S.-produced cars
prohibitively expensive for Chinese consumers. For example, during the trade war in

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 2018, tariffs on American-made cars increased to 40%, significantly reducing their
competitiveness in the Chinese market.
- Price Sensitivity: Chinese consumers are highly price-sensitive, especially in a
market where local automakers and joint ventures already offer competitive options.
Higher prices due to tariffs and shipping costs would likely result in a loss of market
share.
- Logistical Challenges: Exporting vehicles involves significant logistics costs and
longer lead times, reducing GM’s ability to respond quickly to changes in demand or
consumer preferences in China.
- Competitive Disadvantage: Competitors like Tesla have faced similar challenges.
After Chinese tariffs on U.S.-made vehicles were raised, Tesla’s sales in China
dropped by 50%. Tesla responded by building a factory in China to circumvent tariffs
and regain competitiveness. GM would face similar pressures.
- Market Perception: Producing vehicles locally signals a commitment to the Chinese
market. In contrast, exporting from the U.S. could damage GM’s reputation and
reduce consumer trust.
Conclusion: Exporting vehicles from the U.S. to China would significantly hinder GM's ability
to compete on price, logistics, and consumer satisfaction, making it an unsustainable
strategy.

4. Why do you think GM went into partnership with a state-owned company to

produce automo- biles in China? What are the possible benefits of such a venture?
What might be the downside?
GM partnered with SAIC Motor, a state-owned enterprise (SOE), to navigate the unique
challenges and opportunities of the Chinese market. Key reasons include:
- Regulatory Requirements:Chinese laws require foreign automakers to form joint
ventures with local companies to operate in the market. Partnering with SAIC
ensured compliance with these regulations.
- Access to Local Expertise:SAIC provides valuable insights into Chinese consumer
preferences, distribution networks, and regulatory landscapes, helping GM tailor its
strategies to the local market.
- Risk Sharing:Establishing production facilities in a foreign country is capital-intensive
and risky. By partnering with SAIC, GM shares both the financial burden and
operational risks.

- Government Support:Partnering with an SOE like SAIC aligns GM’s interests with the
Chinese government’s industrial policies, increasing the likelihood of receiving
subsidies and policy support.
- Scale and Market Presence:SAIC’s established manufacturing capabilities and
market presence allowed GM to scale operations rapidly and capture significant
market share.
- Potential Downsides: Profit Sharing: GM must split revenues with SAIC, reducing
overall profitability. Limited Autonomy: Joint ventures may constrain GM’s ability to
make independent decisions about strategy or operations.
Conclusion: While there are downsides to joint ventures, partnering with SAIC was essential
for GM to establish and grow its presence in China.

5. What does this case teach you about benefits and costs of import tariffs?

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This case illustrates the complex implications of import tariffs:
Benefits of Tariffs:
- Protection for Domestic Industries: Tariffs encourage companies to invest in domestic
production rather than relying on imports.
- Incentive for Local Manufacturing: Tariffs like those in China can prompt companies
to build factories locally, creating jobs and boosting the economy.
Costs of Tariffs:
- Increased Consumer Prices: Higher tariffs result in higher prices for imported goods,
which can reduce consumer demand.
- Retaliatory Measures: As seen in the U.S.-China trade war, tariffs can provoke
countermeasures, escalating trade tensions and harming industries reliant on
exports.
- Market Access Challenges: For companies like Tesla, tariffs significantly reduced
their ability to compete in China, forcing them to change their production strategies.
Conclusion: Tariffs can both incentivize local production and create economic barriers.

Chap 1: Boeing’s global production system

a. What are the benefits to Boeing of outsourcing manufacturing of components of
the Boeing 787 to firms based in other countries?
- Access to World-Class Expertise: By outsourcing to global suppliers like Mitsubishi
for wings and Toray Industries for carbon-fiber composites, Boeing leverages
specialized expertise that it might not possess in-house. This enhances the overall
quality and efficiency of the 787.
- Cost Savings: Outsourcing allows Boeing to reduce capital expenditures and
operational costs by avoiding the need to develop or expand its own production
facilities. Suppliers bear a portion of the risks and investments.
- Market Access and Relationship Building: Outsourcing to firms in countries like
Japan, Italy, and France helps Boeing secure business in those regions. For
example, awarding contracts to Mitsubishi led to large orders for Boeing aircraft from
Japanese airlines.

- Flexibility and Focus: By outsourcing components, Boeing focuses on its core

competencies, such as engineering design, final assembly, and marketing, while
letting external suppliers handle manufacturing.
- Risk Sharing: Suppliers take on some financial and operational risks, such as
ramping up capacity and managing production challenges.

b. What are the potential costs and risks to Boeing of outsourcing?

- Coordination Challenges: Managing a global supply chain is complex, as
demonstrated by the 787 delays caused by late deliveries, engineering issues, and
components that didn’t fit together properly.
- Loss of Control: Outsourcing reduces Boeing’s direct oversight over production
quality and timelines, increasing the risk of disruptions.
- Dependence on Suppliers: Reliance on suppliers for critical components, such as
wings and fuselage parts, makes Boeing vulnerable to their financial stability and
operational capabilities.

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 - Erosion of Core Skills: Over time, outsourcing key manufacturing processes can lead
to the loss of internal expertise, as seen with Boeing's diminished wing-production
skills.
- Reputational and Financial Costs: Delays and quality issues can damage Boeing’s
reputation and lead to penalties for late deliveries, as happened with the 787.

c. In addition to foreign subcontractors and Boeing, who else benefits from Boeing’s
decision to outsource component part manufacturing to other nations? Who are the
potential losers?
Beneficiaries:
- Foreign Subcontractors: Companies like Mitsubishi, Alenia Aeronautica, and
Messier-Dowty benefit from lucrative contracts, boosting their revenues and global
reputation.
- Foreign Governments: Outsourcing creates jobs and stimulates economic activity in
supplier nations, often fostering goodwill and strengthening trade relationships.
- Boeing Customers: Airlines benefit from access to innovative aircraft like the 787,
which are lighter, more fuel-efficient, and more cost-effective to operate.

Potential Losers:
- American Workers: Outsourcing reduces manufacturing jobs in the U.S., potentially
impacting local communities dependent on Boeing for employment.
- U.S. Communities: Communities near Boeing’s traditional production sites may
experience economic stagnation or decline due to job losses.
- Suppliers Facing Challenges: Some suppliers, like Vought Aircraft, struggled to meet
Boeing’s demands and faced significant financial and operational difficulties.

d. If Boeing’s management decided to keep all production in America, what do you

think the effect would be on the company, its employees, and the communities that
depend on it?
Effects on Boeing:
- Increased Costs: Developing and maintaining in-house production facilities would
significantly raise capital and operational expenses, potentially reducing profitability.
- Reduced Global Competitiveness: Higher costs could make Boeing’s planes less
price-competitive, especially against Airbus, which also leverages global outsourcing.
- Regained Control: Boeing would have greater oversight over production, potentially
improving quality and reducing delays.
Effects on Employees:
- Job Creation: Keeping production in the U.S. would create more high-paying
manufacturing jobs, boosting employment and morale.
- Skill Development: Employees would develop expertise in advanced manufacturing
techniques, such as carbon-fiber wing production.
Effects on Communities:
- Economic Growth: Communities near Boeing’s production facilities would benefit
from increased economic activity and job opportunities.
- Risk of Overreliance: Dependence on Boeing for economic stability could expose
communities to risks if the company faces financial difficulties.

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e. On balance, do you think that the kind of outsourcing undertaken by Boeing is a
good thing or a bad thing for the American economy? Explain your reasoning.
Evaluation:
- Positive Aspects: Outsourcing allows Boeing to remain competitive in the global
market, which is vital for sustaining its position as a major exporter and for
maintaining U.S. technological leadership in aerospace. The resulting revenue
supports high-paying jobs in engineering, sales, and assembly within the U.S.
- Negative Aspects: The loss of manufacturing jobs and potential erosion of core skills
are significant downsides. Outsourcing also contributes to economic disparities
between regions dependent on manufacturing and those benefiting from
higher-skilled jobs.

Chap 2: “Did Walmart Violate the Foreign Corrupt Practices Act?”

Read the Management Focus “Did Walmart Violate the Foreign Corrupt Practices
Act?” What is your opinion? If you think it did, what do you think the consequences
will be for Walmart? Did Walmart Violate the Foreign Corrupt Practices Act (FCPA)?
- Yes, Walmart’s actions likely constituted a violation of the FCPA, which prohibits U.S.
companies and their subsidiaries from bribing foreign officials to gain a business
advantage. The law applies not only to direct bribes but also to the actions of third
parties acting on behalf of the company. Walmart’s alleged conduct, including:
- Payment of Bribes: Walmart de Mexico’s $52,000 payment to alter zoning maps and
other instances of bribery totaling hundreds of thousands of dollars to bypass legal
and regulatory requirements.
- Intent to Gain Business Advantage: These payments directly facilitated Walmart's
ability to build stores in restricted zones and areas without proper permits, providing it
with an unfair competitive advantage.
- Failure to Address Corruption: After being alerted to the bribery allegations, Walmart
executives appeared to prioritize damage control over transparency, including
assigning the investigation to individuals implicated in the misconduct.
- These actions demonstrate both the occurrence of bribery and a failure to maintain
robust internal controls to prevent such violations, which are key aspects of the
FCPA.

Consequences for Walmart

- Legal and Financial Penalties: Walmart settled with the U.S. Department of Justice
and the SEC in 2017 for $283 million. Although this was less than expected, it
represents a significant financial consequence.
- Reputational Damage: The New York Times investigation and subsequent public
scrutiny tarnished Walmart’s global image, highlighting ethical lapses in its
operations.
- Increased Oversight and Compliance Costs: Walmart incurred over $612 million in
legal fees for its internal investigations and has likely had to invest heavily in
improving compliance systems to prevent future issues.
- Operational Impact: Allegations and investigations in Mexico, China, and India
suggest that the bribery issue was not isolated. This could lead to long-term

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 operational challenges, including stricter regulatory scrutiny and potential reluctance
from foreign governments to work with Walmart.
- Ethical Considerations: Walmart’s actions suggest a prioritization of business
expansion at the expense of ethical conduct. While bribery may have expedited store
openings and facilitated regulatory bypasses, it undermines the rule of law and
perpetuates systemic corruption in the affected regions. This raises moral questions
about the trade-off between short-term business gains and long-term integrity.
- Broader Implications: For the U.S. Economy and Businesses: Cases like Walmart’s
can damage the global perception of American companies, potentially leading to
stricter international regulations and reduced goodwill.
For Local Communities:
- The communities near Walmart’s operations in Mexico might have suffered from the
environmental and social consequences of unchecked development.

Chap 2: Transformation in Saudi Arabia (closing case)

1. What long-term economic and political problems does Saudi Arabia face?
Economic Problems:
- Overdependence on Oil: The economy is heavily reliant on oil exports, which makes
it vulnerable to fluctuations in oil prices. This dependency risks economic instability
during periods of low oil demand or price collapses, as seen in 2014–2016.
- Youth Unemployment: With 70% of the population under 30 and a high
unemployment rate of 12%, the country faces significant challenges in creating jobs
for its youth.
- Limited Private Sector: The non-oil private sector remains underdeveloped, with the
labor market dominated by foreign workers.
Political Problems:
- Conservative Resistance: The reforms proposed by Crown Prince Muhammad bin
Salman face resistance from conservative religious leaders and members of the royal
family who have benefitted from the status quo.
- Autocratic Governance: The consolidation of power under MBS and the suppression
of dissent raise concerns about political stability and transparency.
- International Reputation: Incidents such as the murder of Jamal Khashoggi have
damaged Saudi Arabia’s global standing, potentially deterring foreign investment.
2. How might the reforms proposed by Muhammad bin Salman potentially address
these problems? Who will gain from these reforms? Who might object and push back
against them?
Proposed Reforms and Their Impact:
- Economic Diversification: Vision 2030 aims to reduce reliance on oil by fostering
growth in other sectors such as technology, tourism, and entertainment.
- Privatization of Saudi Aramco: This could generate capital to invest in infrastructure
and diversify the economy.
- Cultural and Social Reforms: Loosening restrictions on women and promoting
moderate Islam may boost societal participation and attract international
partnerships.
- Investment in NEOM: The $500 billion project could stimulate innovation,
entrepreneurship, and foreign investment.

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Who Gains:
- Youth and Entrepreneurs: More jobs and business opportunities could emerge from a
diversified economy.
- Women: Social reforms, such as allowing women to drive, create more opportunities
for participation in the workforce and society.
- Foreign Investors: The privatization of Aramco and infrastructure development offer
lucrative investment opportunities.
Who Pushes Back:
- Conservative Clergy: Religious leaders may resist reforms that challenge traditional
interpretations of Islam.
- Royal Family Members: Those who lose power or privilege due to MBS’s
centralization of authority may oppose his agenda.
- General Population: Cuts to subsidies and the introduction of taxes have faced public
resistance.
3. What are the potential benefits to Saudi Arabia of privatizing Saudi Aramco? Is
there a downside?
Benefits:
- Capital Infusion: The IPO could raise billions of dollars to fund diversification projects
under Vision 2030.
- Increased Transparency: The privatization process might push Aramco to adopt
better governance and accountability standards.
- Global Partnerships: Attracting international investors could strengthen ties with
global markets.
Downsides:
- Loss of Control: Selling shares could reduce the government’s control over a critical
revenue source.
- Market Vulnerability: The value of Aramco shares may be volatile, especially if oil
prices decline or global energy demand shifts toward renewables.
- Public Opposition: Many Saudis view Aramco as a national treasure and may resist
its privatization.
4. Is it morally correct for international businesses to invest in a country that denies
basic rights to women?
Argument for Investment:
- Catalyst for Change: International businesses can bring progressive practices,
potentially influencing local norms and supporting ongoing reforms.
- Economic Benefits: Investment can help create jobs and improve living standards for
all, including women.
Argument Against Investment:
- Ethical Concerns: Investing in a nation with systemic gender discrimination could be
seen as endorsing or perpetuating inequality.
- Corporate Responsibility: Companies have a moral obligation to uphold human rights
in their operations and investments.
5. Is it morally correct for international businesses to invest in an autocratic country
where the current leader has been implicated in ordering the murder of one of his
critics?
Argument for Investment:
- Economic Development: Foreign investment can improve the quality of life for
ordinary citizens, regardless of the political system.

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 - Engagement as Influence: Engagement with autocratic regimes might encourage
political reform over time.
Argument Against Investment:
- Complicity in Abuses: Investment may be perceived as tacit approval of the regime’s
actions, including human rights violations.
- Reputation Risk: Associating with controversial regimes can harm a company’s brand
and deter customers.

Chap 3: “India’s Economic Transformation

Summary:

India's economic transformation began post-independence in 1947, characterized by a

mixed economy dominated by state-owned enterprises, centralized planning, and subsidies,
which stifled private sector growth. By the 1990s, India faced economic stagnation, with low
GDP per capita and widespread poverty.
In 1991, India initiated major reforms, dismantling industrial licensing and opening sectors
like electricity, oil, steel, air transport, and telecommunications to private and foreign
investment. Tariffs and taxes were reduced, and privatization of state-owned businesses
commenced. These reforms led to significant growth, with the economy expanding by about
7% annually from 1997 to 2017, and a surge in foreign investment.
India emerged as a global hub for software development and pharmaceuticals, particularly in
low-cost generics. However, challenges persist, including political resistance to further
reforms and labor laws that hinder business expansion. Despite these obstacles, private
firms in India are much more productive than state-owned enterprises.

1. What kind of economic system did India operate under during 1947–1990? What
kind of system is it moving toward today? What are the impediments to completing
this transformation?

Economic System (1947–1990) - India operated under a mixed economy characterized by:
- Extensive Public Ownership: The government owned and controlled many key
industries, particularly in sectors like heavy manufacturing, steel, chemicals, and auto
production.
- Centralized Planning: Economic activities were heavily regulated by the state, with
production quotas and price controls limiting private sector growth.
- Limited Private Sector Role: Private businesses had significant restrictions, facing
bureaucratic hurdles and licensing requirements.
Current System - Since the 1991 reforms, India has been transitioning toward a
market-oriented economy that emphasizes:
- Liberalization: Reducing government control over the economy.
- Privatization: Shifting ownership of state enterprises to private hands.
- Deregulation: Easing restrictions on businesses and foreign investments.
Impediments to Transformation
- Political Opposition: Resistance from various political factions to liberalization and
privatization.

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 - Bureaucratic Delays: Complex and inefficient bureaucratic processes hinder
progress.
- Labor Laws: Rigid laws create barriers for businesses, particularly regarding hiring
and firing practices.
- State-Owned Enterprises: Continued dominance in certain sectors impacts overall
efficiency and competitiveness.

2. How might widespread public ownership of businesses and extensive government

regulations have affected (i) the efficiency of state and private businesses and (ii) the
rate of new business formation in India during the 1947–1990 time frame? How do you
think these factors affected the rate of economic growth in India during this time
frame?

Efficiency of State and Private Businesses

- State-Owned Enterprises: Often inefficient due to bureaucratic control, lack of
competition, and political interference. They had limited incentives to innovate or
reduce costs.
- Private Businesses: Faced significant barriers to growth, including strict regulations
and licensing requirements that restricted their ability to diversify and compete
effectively.
Rate of New Business Formation
- The regulatory environment created substantial hurdles for entrepreneurs, limiting
access to capital and market entry. Licensing requirements and import restrictions
made it challenging for new businesses to emerge, reducing overall entrepreneurial
activity.
Economic Growth Impact: The inefficiencies in both state-owned and private sectors,
compounded by limited private sector activity, led to slow economic growth during this
period. Government interventions and protectionist policies prevented the economy from
fully realizing its potential.

3. How would privatization, deregulation, and the removal of barriers to foreign direct
investment affect the efficiency of business, new business formation, and the rate of
economic growth in India during the post1990 period?

Increased Efficiency of Business

- Privatization: Introducing competition would enhance productivity in private firms and
compel state-owned enterprises to improve efficiency or risk privatization.
- Deregulation: Reducing bureaucratic barriers would streamline operations and
encourage innovation.
New Business Formation: Easing regulatory requirements and market access would foster
entrepreneurship, enabling new businesses to enter the market more easily.
Economic Growth: Increased efficiency and entrepreneurship would likely lead to higher
economic growth rates, driven by greater foreign investment, technology transfer, and job
creation.

4. India now has pockets of strengths in key high-technology industries such as

software and pharmaceuticals. Why do you think India is developing strength in these

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areas? How might success in these industries help generate growth in the other
sectors of the Indian economy?

Reasons for Development in Software and Pharmaceuticals

- Cost-Effective Labor: A large pool of skilled, low-cost labor is particularly
advantageous in IT and pharmaceuticals.
- Education and Training: A focus on engineering and technical education has made
India a global hub for software development and generic pharmaceuticals.
- Government Support: Favorable policies and incentives have bolstered growth in
these sectors.
Impact on Other Sectors
- Technological Advancement: Success in high-tech industries can drive productivity
improvements across various sectors.
- Investment in Infrastructure: Growth in these industries could generate demand for
better infrastructure, benefiting related sectors like construction and logistics.
- Exports and Trade: Strong performance in software and pharmaceuticals can
enhance India’s trade balance and attract further investment.

5. Given what is now occurring in the Indian economy, do you think the country
represents an attractive target for inward investment by foreign multinationals selling
consumer products? Why?

Reasons for Attractiveness

- Large Consumer Base: India’s growing middle class presents significant
opportunities for foreign companies, particularly in consumer products.
- Economic Growth: Despite ongoing challenges, India has maintained robust growth
rates, especially in competitive sectors like IT and pharmaceuticals.
- Market Potential: The diverse and vast market offers numerous opportunities for
foreign entrants.
- Government Policies: Recent reforms have reduced barriers to foreign direct
investment and simplified regulations, facilitating easier market entry.
Challenges
- Regulatory Hurdles: Existing complexities can deter foreign investment.
- Labor Laws: Rigid regulations pose challenges for firms trying to operate efficiently.
- Resistance to Privatization: Continued challenges in this area can create uncertainty.

Chap 3: Brazil’s Struggling Economy (closing case)

Summary:
Brazil's economy experienced rapid growth from 2000 to 2012, driven by booming
commodity exports and domestic demand.
However, since 2012, Brazil has faced a significant economic downturn. Contributing factors
include weaker export demand, falling commodity prices, government overspending, and
structural issues like high pension obligations and inefficient regulations. The fiscal deficit
surged, debt rose, and high interest rates further slowed economic activity. The government
also struggled with a massive corruption scandal that led to President Dilma Rousseff's
impeachment in 2016.

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Successive president Michel Temer implemented reforms, freezing public spending and
overhauling labor laws, but pension reforms remained elusive. In 2018, Jair Bolsonaro won
the presidency, promising to tackle crime and reform the pension system.

1. Brazil was seen as one of the world’s fastest- growing developing economies in the
2000–2010 period. What were the foundations of this success?
Brazil's rapid economic growth during this period was driven by several factors:
- Booming Commodity Exports: High global demand and prices for commodities like
coffee, soybeans, and iron ore significantly boosted export revenues.
- Domestic Demand: Strong consumption fueled by growing incomes and access to
cheap credit supported internal economic activity.
- Stable Macro-economic Policies: Brazil maintained moderate inflation rates and
relatively conservative fiscal and monetary policies, which bolstered investor
confidence.
- Foreign Investment: Capital inflows contributed to infrastructure development and
industrial expansion.
- Favorable Demographics: A large and youthful workforce supported economic
dynamism and productivity.

2. Why did Brazil’s economic growth falter after 2012? How much of the damage was
self-inflicted, and how much was due to factors outside of the country’s control?
External Factors:
- Decline in Commodity Prices: A drop in global demand for commodities hurt Brazil’s
export-driven economy.
- Weaker International Trade: Exports contracted, reducing foreign earnings.
Internal Factors:
- Excessive Government Spending: Extravagant expenditures on pensions and tax
breaks created unsustainable fiscal deficits.
- Corruption Scandals: Political instability and loss of public trust dampened economic
confidence.
- High Interest Rates: To combat inflation, interest rates were raised, increasing the
cost of borrowing and reducing investment.
- Structural Issues: Complex tax codes, restrictive labor laws, and protectionist tariffs
stifled industrial productivity and competitiveness.
Proportion of Damage: While external factors contributed, much of the damage was
self-inflicted due to mismanagement, structural inefficiencies, and political corruption.

3. What do you think of Temer’s economic reforms? Were they on the right track?
Temer’s reforms addressed key structural issues:
- Public Spending Freeze: Capped spending to control fiscal deficits.
- Labor Law Reforms: Made it easier to fire unproductive workers, improving workforce
efficiency.
- Privatizations: Reduced state control, raising capital and boosting economic
efficiency.
- Inflation and Interest Rate Reductions: Helped stabilize the economy and
encouraged borrowing and investment.

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Assessment: These reforms were steps in the right direction, tackling Brazil’s chronic
inefficiencies and fiscal imbalances. However, the failure to pass pension reforms limited
their impact.

4. What policies do you think Brazil should adopt going forward to reignite economic
growth? How easy would it be to implement these policies in Brazil?
Key Recommendations:
- Pension Reform: Raise the retirement age and adjust benefits to align with the aging
population. Streamline the pension system to reduce fiscal strain.
- Tax and Regulatory Reforms: Simplify the tax code to reduce compliance burdens for
businesses. Eliminate protectionist tariffs to encourage competition and innovation.
- Infrastructure Investment: Improve transportation and logistics to support trade and
domestic connectivity. Partner with private investors to fund large-scale projects.
- Corruption Reduction: Strengthen institutions and transparency mechanisms to
rebuild public trust and attract foreign investment.
- Industrial Policy: Diversify the economy beyond commodities by promoting
technology, manufacturing, and services.
Implementation Challenges:
- Political Resistance: Pension and tax reforms face significant opposition from vested
interests and a fragmented congress.
- Public Sentiment: Reducing benefits or subsidies could spark protests and backlash.
- Institutional Weakness: Corruption and inefficiencies in bureaucracy can hinder policy
enforcement.

Chap 4: Turkey, Its Religion, and Politics

a. Can you see anything in the values and norms of Islam that is hostile to business?
Explain.
- No, Islamic values and norms are not inherently hostile to business. In fact, Islam
often supports business and trade:

- Entrepreneurial Encouragement:The Prophet Muhammad himself was a trader and

emphasized merchant honor and the importance of ethical business practices.
- Work Ethic:Islamic teachings advocate for hard work to provide for one’s family, with
90% of a Muslim’s life considered to be devoted to work.
- Fairness and Honesty:Islam encourages fairness, honesty, and trust in business
dealings, which aligns with modern principles of corporate ethics.
However, some aspects of traditional Islamic practice might pose challenges in a globalized
business context:
- Interest (Riba):Charging or earning interest is prohibited in Islamic finance, which
could complicate interactions with conventional banking systems.
- Cultural Conservatism: Traditional views, such as restrictions on women’s roles in the
workplace, can limit workforce diversity and productivity in some regions.

b. What does the experience of the region around Kayseri teach about the relationship
between Islam and business?

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The experience in Kayseri illustrates that Islam can coexist harmoniously with business and
economic success:
- Islamic Values and Work Ethic: The entrepreneurial spirit in Kayseri is described as
"Islamic Calvinism," where traditional Islamic values are merged with a strong work
ethic resembling Protestantism.
- Adoption of Global Practices: Despite its Islamic foundation, businesses in Kayseri
have embraced globalization, adopting practices from Western capitalism to compete
effectively in international markets.
- Export-Oriented Growth:Many businesses in Kayseri export a substantial percentage
of their products, demonstrating that Islamic values do not hinder global trade.
However, the region’s low female workforce participation highlights an area where traditional
views may conflict with modern business practices.

c. What are the implications of Islamic values toward business for the participation of a
country such as Turkey in the global economy or becoming a member of the European
Union?
Positive Implications:
● Ethical Foundation: Islamic values such as honesty and fairness in business can
build trust with global partners.
● Work Ethic: The entrepreneurial spirit and hard work seen in regions like Kayseri
align well with global economic participation.
● Adaptability: Turkey has shown its ability to integrate Islamic values with
globalization, indicating its readiness to engage with Western markets.
Challenges and Concerns:
● Cultural Differences: Critics in the EU may view Islamic cultural practices, particularly
regarding gender roles, as incompatible with European social norms.
● Perceived Resistance to Secularization: The integration of religion and business may
raise concerns about Turkey's alignment with the secular principles of the EU.
Path Forward for Turkey:
● Turkey could address EU concerns by demonstrating progress in areas like gender
equality and secular governance while continuing to embrace Islamic values that
promote ethical business.
● Strengthening ties with the global economy through export growth and adherence to
international business standards could bolster its case for EU membership.

Chap 4: China and Its Guanxi

a. Why do you think it is so important to cultivate guanxi and guanxiwang in China?
Cultivating guanxi (relationships) and guanxiwang (relationship networks) is essential in
China because of the following reasons:

- Cultural Norms and Confucian Influence: The Confucian tradition places a high value
on relationships and reciprocal obligations. Building guanxi aligns with these
long-standing cultural expectations.

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 - Navigating Bureaucracy: Chinese regulations can be complex and rigid. Guanxi
helps businesses bypass bureaucratic red tape and secure approvals that might
otherwise take excessive time or be denied.
- Competitive Advantage:Strong guanxiwang can differentiate a business by granting
access to exclusive opportunities, government support, and other resources that
competitors without such connections lack.
- Trust and Loyalty:Guanxi fosters trust and loyalty, which are crucial in Chinese
business culture, often outweighing formal contracts.

b. What does the experience of DMG tell us about the way things work in China? What
would likely happen to a business that obeyed all the rules and regulations, rather than trying
to find a way around them like Dan Mintz?
Insights from DMG’s Experience:
- DMG’s success illustrates that in China, relationships and connections often hold
more sway than strict adherence to rules. Regulations can be flexible if one has the
right guanxi.
- DMG leveraged guanxi to gain permissions (e.g., using traditional Chinese
characters in ads, filming in restricted areas) that would have been impossible
without these connections.
Impact on Businesses Following All Rules:
- Delayed Processes: Businesses adhering strictly to regulations may face prolonged
bureaucratic delays, limiting their operational efficiency.
- Missed Opportunities: They might lose out on opportunities that require special
approvals or flexibility not provided by the formal system.
- Competitive Disadvantage: Firms without guanxi may struggle to compete with those
that can navigate regulations through connections

c. What ethical issues might arise when draw- ing on guanxiwang to get things done in
China? What does this suggest about the limits of using guanxiwang for a Western business
committed to high ethical standards?
Ethical Issues:
- Corruption Risks:Guanxi might blur the line between building relationships and
engaging in bribery or favoritism, potentially leading to unethical practices.
- Unfair Advantage:Relying on guanxi could marginalize businesses or individuals
without access to such networks, creating an uneven playing field.
- Violation of Regulations:Bypassing laws and regulations through guanxi can
undermine the rule of law and harm broader economic and social systems.
- Cultural Conflict:Western businesses with strong ethical codes may face dilemmas
when guanxi practices conflict with anti-corruption or compliance standards.
Limits for Western Businesses:
- Legal Compliance: Western firms bound by international anti-corruption laws (e.g.,
the U.S. Foreign Corrupt Practices Act) must ensure that leveraging guanxi does not
involve illegal activities.
- Reputation Risks: Overreliance on guanxi could damage a company’s reputation if
perceived as unethical by stakeholders.
- Operational Boundaries: While guanxi may be necessary in some situations, Western
businesses must carefully balance relationship-building with maintaining integrity and
adhering to global ethical standards.

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Chap 4:China, Hong Kong, Macau, and Taiwan (Closing case)
1.When Goldman Sachs chief economist Jim O’Neill coined the acronym BRIC in 2001 to
refer to Brazil, Russia, India, and China, the focus was to highlight the immense collective
economic potential of these countries. Since that time, China and Russia have influenced
the international marketplace in political ways as well. How do you think these four countries
or a subset of them will likely influence the world’s cultures in the next 10 years?

● China and Russia: Both countries are already leveraging soft power to shape
international cultural narratives. For China, initiatives like the Belt and Road Initiative
(BRI) and Confucius Institutes are channels to promote its cultural values. Russia
continues to influence cultural spheres through media and partnerships in the
post-Soviet space. Over the next decade, China’s economic and technological
dominance might lead to increased adoption of Chinese cultural elements (e.g.,
Mandarin language learning, Chinese cinema, and digital platforms like TikTok).
● India and Brazil: India’s cultural influence will likely grow through its tech industry,
yoga, Bollywood, and diaspora communities. Brazil could see cultural influence
expand via soft power in sports, music, and environmental leadership given the
Amazon's importance.

Together, these nations might redefine globalization by promoting non-Western cultural

norms, particularly in developing nations.

2. Anyone who has been to Hong Kong typically says it is different from mainland China,
more like Singapore, albeit with a strong connection to China. Do you think Hong Kong will
become more like China in the next few years, or will China leverage Hong Kong as an asset
to engage more capitalistically in the international market- place instead?

● Integration: China may push for further assimilation of Hong Kong’s political and
legal systems, gradually eroding its distinctiveness. The trend since 2019 suggests
stronger Chinese control through laws like the National Security Law.
● Economic Leverage: Alternatively, China could treat Hong Kong as a gateway to
international markets, preserving its distinct legal and financial systems to maintain
global investor confidence.

While Hong Kong’s identity is deeply rooted in its colonial past and autonomy, China might
aim for a hybrid model that maximizes economic benefits while minimizing political
resistance.

3. Macau was under Portuguese influence until 1999, which is not that long ago. Many in
Macau welcomed the Chinese takeover so that the area could be better taken care of (e.g.,
infrastructure, economy). But being part of the Portuguese administration from 1887 to 1999
clearly has imbued their cultural values and beliefs in the mindset of Macau’s citizens. How
are these values and beliefs likely to influence the Macau–China relationship in the years to
come?

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 ● Positive Relationship: Macau has shown greater acceptance of Chinese authority
compared to Hong Kong, partly due to the economic growth facilitated by China after
1999.
● Cultural Preservation: Portuguese heritage (e.g., architecture, festivals) continues
to draw tourism, creating an incentive for China to allow cultural distinctiveness while
integrating Macau economically.
● Diplomatic Role: Macau’s Portuguese connections position it as a cultural bridge in
China’s relationships with Portuguese-speaking countries.

4. Taiwan maintains diplomatic relations with some 76 member states of the United Nations
(19 in an official capacity and 57 in an unofficial capacity). The nation’s culture is a blend of
Confucianist Han Chinese and Taiwanese aboriginal influ- ences. How would you handle the
link between China and Taiwan—culturally, economically, and politically?

● Culturally: Acknowledge Taiwan’s distinct identity while recognizing shared Han

Chinese roots. Promoting cultural exchanges (e.g., arts, language) could ease
tensions.
● Economically: Encourage mutual economic benefits through trade agreements,
leveraging Taiwan’s technological leadership (e.g., semiconductors) while
maintaining its autonomy.
● Politically: Adopt a pragmatic approach, respecting Taiwan’s democratic system
while avoiding provocative moves like formal independence declarations.
International diplomacy should emphasize peaceful dialogue and prevent escalation.

A dual approach of fostering cooperation while avoiding confrontation is key to managing

this delicate link.

Chap 5: Sustainability Initiatives at Natura, The Body Shop, and Aesop (

closing case)

1. With its three core companies (Natura Cosmetics, The Body Shop, and Aesop),
Natura & Co SA blends three different business models for interacting with the
customer. In the end, all three models are focused on sustainable business practices.
What can other companies learn from Natura & Co SA on how to be sustainable?

Other companies can learn several key lessons from Natura & Co SA's approach to
sustainability:

● Integration Across Business Models: Natura demonstrates that sustainability can

be embedded into diverse business models. Whether through direct sales (Natura),
ethical product development (The Body Shop), or premium experiential marketing
(Aesop), the company aligns all its strategies with sustainability goals.
● Innovation Investment: Natura invests heavily in innovation, launching new
products that are both appealing to consumers and aligned with sustainable

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 practices. Allocating resources to R&D helps the company stay ahead in offering
environmentally conscious products.
● Commitment to Certifications: Becoming a Certified B Corporation underscores
Natura's dedication to balancing profit with societal and environmental impact,
providing a benchmark for other companies aiming to build trust and transparency.
● Sustainability as a Brand Value: By integrating sustainability into its brand DNA,
Natura engages stakeholders meaningfully, proving that sustainability is not just a
CSR initiative but a value-driving force.

2. The Body Shop has been a leader in banning animal testing of cosmetics products
worldwide since the 1980s and is tirelessly working to ban animal testing in the
cosmetics industry. Is this part of being sustainable or is animal testing a different
focus?

Banning animal testing is part of broader sustainability practices. While sustainability

primarily focuses on environmental, social, and economic balance, ethical considerations
like animal welfare are interconnected. The Body Shop’s efforts in banning animal testing
align with:

● Social Sustainability: Supporting humane treatment of animals reflects ethical

production practices that resonate with consumers and stakeholders.
● Environmental Impact: Animal testing often involves waste and harmful chemicals.
By banning such practices, companies reduce environmental harm and promote
cleaner production.

In summary, banning animal testing contributes to sustainable business practices by

addressing both ethical and environmental concerns.

3. Aesop is not using traditional advertisements or discount sales to promote its

products. Instead, Aesop gets its promotional communication mostly by
word-of-mouth for the design of its products, stores, and events, which are a singular
mix of in- dulgent product experiences, thoughtful language, and modern minimalist
design. If you had to inter- act with Natura & Co SA, which customer engage- ment
model—Natura’s, The Body Shop’s, or Aesop’s—would be the best for you and why?

I would prefer Aesop’s customer engagement model because of its focus on experiential
design and minimalist aesthetics. This approach emphasizes quality and thoughtful
customer interaction, creating a unique and memorable brand experience. Relying on
word-of-mouth also feels more authentic and exclusive compared to traditional advertising.

4. How much would it mean to you that a company operated in a sustainable way?
Would you pay 5 percent, 10 percent, or 25 percent more for a product if the quality
was the same as non- sustainable alternatives? What if the quality of the product was
lower but the price the same?

Operating sustainably holds significant value for me:

● Paying a Premium: I would be willing to pay 10-25% more for a product of the same
quality if the company adheres to sustainable practices. Sustainability reflects a

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 long-term commitment to environmental health and ethical operations, which is worth
supporting.
● Lower Quality Products at the Same Price: If the quality were slightly lower but the
price remained the same, my decision would depend on the extent of the
sustainability initiatives. I might still choose the product if the company made
substantial contributions to reducing environmental harm or promoting social equity.

Chap 6 Trade Wars Are Good and Easy to Win (closing case)
1. What economic theory of trade do Donald Trump’s views seem most closely aligned
with?

Donald Trump’s views are most closely aligned with mercantilism, an economic theory that
advocates for maximizing exports and minimizing imports to achieve a trade surplus. This
theory equates a positive trade balance with economic strength and sees international trade
as a zero-sum game where one country’s gain is another’s loss. Trump's focus on trade
deficits as a sign of economic weakness and his protectionist measures, such as imposing
tariffs to shield domestic industries, reflect mercantilist ideas.

2. What are the possible benefits of Donald Trump’s position on international trade?
What are the potential costs and risks of his position?

Possible Benefits:

● Protection of Domestic Industries: Tariffs on steel and aluminum may protect

domestic producers, helping them remain competitive against cheaper imports.
● National Security: Strengthening industries deemed vital for national security, such
as steel and aluminum, can reduce reliance on foreign suppliers during emergencies.
● Leverage in Trade Negotiations: By imposing tariffs, Trump could potentially push
other countries to renegotiate trade deals perceived as unfair to the U.S., creating
opportunities for more favorable terms.

Potential Costs and Risks:

● Higher Input Costs: Tariffs increase costs for industries that use steel and
aluminum, such as construction, automotive, and aerospace, potentially leading to
higher prices for consumers.
● Job Losses in Downstream Industries: Industries relying on these inputs could
face reduced profitability or competitiveness, leading to job losses. This risk is
significant since far more Americans work in industries that use steel and aluminum
than in producing them.
● Retaliation and Trade Wars: Trading partners may retaliate with their own tariffs,
escalating into a trade war. This could reduce global trade volumes, harm
export-oriented U.S. businesses, and disrupt global supply chains.
● Global Economic Impact: Protectionist measures risk slowing global economic
growth and could undermine the rules-based international trading system established
post-WWII.

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 ● Historical Precedent: The Smoot-Hawley Tariff of the 1930s, a protectionist policy,
exacerbated the Great Depression by prompting retaliatory measures and reducing
global trade.

3. Do you think Trump is correct? Are trade wars good and easy to win? What does it
mean to “win” a trade war? What does it mean to “lose”?

Trade Wars: Good and Easy to Win?

● Most economists disagree with the idea that trade wars are good or easy to win.
History shows that trade wars often result in mutual economic harm. For example,
retaliatory tariffs can hurt both exporting and importing nations, reducing overall
economic welfare.
● While some industries might temporarily benefit, the broader economy typically
suffers from higher prices, disrupted supply chains, and reduced international
cooperation.

Winning vs. Losing a Trade War:

● Winning: From Trump’s perspective, “winning” a trade war might mean reducing
trade deficits, securing more favorable trade agreements, or protecting key
industries. However, these gains are often temporary or limited in scope.
● Losing: “Losing” a trade war could mean experiencing significant retaliatory tariffs,
job losses in export-dependent sectors, and economic isolation. It might also result in
long-term damage to global relationships and the U.S.'s leadership role in
international trade.

In summary, while Trump’s protectionist stance could yield short-term gains for specific
industries, the broader economic risks and historical evidence suggest that trade wars are
not easily won and can lead to widespread economic harm. A more collaborative approach
to addressing trade imbalances might yield better long-term outcomes.

Chap 6: “Is China Manipulating Its Currency in Pursuit of a

Neo-Mercantilist Policy?

a. Do you think China is pursuing a currency policy that can be characterized as

neo-mercantilist?

China's currency policy has elements that align with neo-mercantilist practices, but the
evidence is mixed:

● Neo-Mercantilist Characteristics:
○ For decades, China has maintained large trade surpluses and amassed
foreign exchange reserves, which some critics argue reflects a strategy to
strengthen its economic power relative to trading partners.

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 ○ Historically, China pegged the yuan to the U.S. dollar at a low exchange rate,
which critics believe kept its exports competitively priced on the global
market, fostering export-led growth.
● Counterarguments:
○ Since 2005, China has allowed the yuan to appreciate significantly (from 8.11
yuan per dollar to 6.05 yuan by 2014), which raised the relative price of
Chinese exports and does not align with a deliberate effort to suppress the
currency’s value for competitive advantage.
○ During 2015–2016, China actively intervened to prevent the yuan from
depreciating, spending $2 trillion in foreign exchange reserves. This was the
opposite of currency manipulation to maintain export competitiveness and
suggests an effort to stabilize the economy rather than pursue
neo-mercantilism.

In conclusion, while China’s past policies might have neo-mercantilist aspects, recent
actions—especially its efforts to stabilize the yuan—complicate this characterization.
Accusations of currency manipulation have diminished, reflecting a more nuanced situation.

b. What should the United States, and other countries, do about this?

1. Diplomatic Engagement:

● Bilateral Dialogues: The U.S. and other nations should maintain open dialogues
with China to address trade imbalances and currency concerns through frameworks
like the U.S.-China Comprehensive Economic Dialogue.
● Engagement in Multilateral Institutions: Encourage cooperation through
international organizations like the IMF and WTO to establish fair trade and currency
practices.

2. Economic Policy Adjustments:

● Encourage Market-Oriented Reforms: Advocate for further liberalization of China's

exchange rate policies to ensure the yuan reflects market fundamentals.
● Address Domestic Competitiveness: Invest in R&D, education, and infrastructure
to reduce reliance on imports and improve global competitiveness rather than
focusing solely on trade deficits.

3. Enforcement of Trade Rules:

● Trade Remedies: Use targeted trade measures, such as anti-dumping and

countervailing duties, to address specific cases of unfair trade practices rather than
resorting to broad tariffs.
● Currency Monitoring: Monitor currency practices and work with China to ensure
transparency in interventions, avoiding unnecessary escalations.

4. Diversification of Supply Chains:

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 ● The U.S. and other nations should encourage diversification of global supply chains
to reduce over-reliance on China. This can be achieved by incentivizing investment in
other developing economies and reshoring key industries.

5. Avoid Escalation:

● Trade Wars Are Counterproductive: Retaliatory tariffs and aggressive rhetoric

harm both parties and global economic growth. A cooperative approach yields better
long-term results.

By balancing diplomacy, domestic policy, and enforcement, the U.S. and other nations can
address concerns about China's trade and currency practices without triggering unnecessary
conflict.

Chap 6: Moving U.S. White- Collar Jobs Offshore.”

a. Who benefits from the outsourcing of skilled white-collar jobs to developing

nations? Who are the losers?

Beneficiaries:

1. Companies in Developed Nations:

○ Firms like Bank of America and Texas Instruments benefit from reduced labor
costs, which can enhance profit margins and competitiveness in the global
market.
○ Start-ups, such as Zoho Corporation, leverage lower costs to scale operations
and compete effectively.
2. Employees and Companies in Developing Nations:
○ Skilled workers in countries like India, the Philippines, and Poland gain
employment opportunities and higher wages than local alternatives.
○ Companies in these nations, such as Infosys and Wipro, expand and profit
from the increased demand for outsourced services.
3. Consumers Globally:
○ Lower costs for companies often translate into lower prices for consumers,
particularly for technology, financial services, and industrial products.
4. Shareholders of Companies Outsourcing Jobs:
○ Cost savings from outsourcing can result in higher profits and, consequently,
increased shareholder returns.

Losers:

1. Displaced Workers in Developed Nations:

○ U.S.-based engineers, IT professionals, architects, and radiologists may lose
jobs or face downward pressure on wages due to competition from lower-cost
labor overseas.
2. Local Economies in Developed Nations:

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 ○ Communities dependent on white-collar industries might experience
economic stagnation or decline, as seen in the manufacturing sector during
earlier waves of outsourcing.
3. Skill Erosion in High-Wage Economies:
○ The loss of white-collar jobs could result in fewer opportunities for young
professionals in developed nations to gain experience and advance in
knowledge-intensive fields.

b. Will developed nations like the United States suffer from the loss of high-skilled
and high-paying jobs?

Short-Term Effects:

1. Job Displacement:
○ Many workers in high-paying sectors may lose their jobs, leading to
temporary increases in unemployment and economic insecurity.
2. Reduced Economic Activity in Certain Sectors:
○ The decline in high-skill, high-wage employment can hurt local economies
reliant on these jobs, reducing tax revenues and consumer spending.

Long-Term Effects:

1. Potential for Innovation and Reskilling:

○ Developed nations have the resources to invest in innovation, education, and
reskilling programs. This can create new high-skill industries, mitigating some
of the negative impacts.
○ Outsourcing lower-value white-collar jobs might push companies to focus on
cutting-edge roles in AI, biotechnology, and renewable energy, which are less
easily outsourced.
2. Competitiveness Concerns:
○ Over-reliance on outsourcing could erode the domestic talent pool and
diminish the country's ability to compete in strategic industries, such as
technology and engineering.
3. Economic Inequality:
○ Outsourcing disproportionately affects middle-class white-collar workers,
potentially widening the income gap in developed nations.

Chap 7 : The United States and South Korea Strike a Revised Trade
Deal

1. Why did the Obama administration pursue a trade deal with Korea in 2012?

Economic Benefits:

● Increased Trade Opportunities: The deal aimed to reduce tariffs and barriers,
promoting the flow of goods and services between the two nations.

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 ● Access to Korean Market: It provided U.S. businesses, especially in sectors like
agriculture, automotive, and services, with access to South Korea’s growing
economy.
● Job Creation: Advocates argued the deal could support U.S. jobs by increasing
exports to South Korea.

Political Benefits:

● Strengthened Alliances: The deal reinforced U.S.-South Korea ties, crucial for
geopolitical stability in East Asia and as a counterbalance to North Korea.
● Strategic Trade Policy: It aligned with the Obama administration’s pivot to Asia,
showcasing U.S. commitment to engaging economically with the region.

Potential Costs:

● Trade Deficits: Critics feared the deal might exacerbate the U.S. trade deficit with
South Korea.
● Job Losses in Specific Sectors: Increased competition, particularly in the
automotive sector, could hurt U.S. workers and companies unable to compete with
South Korean imports.
● Regulatory Concerns: Differences in safety and environmental standards could
complicate implementation.

2. Was the 2012 deal a “job killer” as claimed by President Trump?

The evidence is mixed:

● Criticism: After the deal, the U.S. trade deficit with South Korea widened, growing
from $13.2 billion in 2011 to $27.6 billion in 2016. This fueled claims that the deal
harmed U.S. industries, particularly automotive manufacturing.
● Counterarguments:
○ Export Growth: U.S. exports to South Korea grew, especially in services and
high-tech products, offsetting some losses.
○ Employment Impact: Studies suggest the net job impact was not as dire as
claimed, with gains in export-driven sectors balancing losses in
import-competing industries.

The "job killer" narrative oversimplifies the complexities of trade dynamics.

3. Motivations for the Trump Administration in Renegotiating the 2012 Deal

Economic Goals:

● Reduce Trade Deficit: Address the imbalance in trade, particularly in the automotive
sector, which Trump viewed as heavily favoring South Korea.

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 ● Protect U.S. Manufacturing: Bolster domestic industries, such as steel and
automobiles, by imposing quotas and extending tariffs.

Political Goals:

● Swing State Appeal: Address concerns in states like Michigan and Ohio, critical to
Trump’s electoral base, where the automotive industry plays a major role.
● Demonstrate Toughness on Trade: Renegotiating the deal showcased Trump’s
commitment to renegotiating "unfair" trade agreements to prioritize American
interests.

Geopolitical Considerations:

● Ensure South Korea remained a close ally amid tensions with North Korea, balancing
trade pressures with strategic cooperation.

4. Who benefits from the revised (2018) deal? Who might lose? Does it represent an
improvement?

Beneficiaries:

● U.S. Auto Manufacturers: The extension of the 25% tariff on South Korean light
trucks and increased quotas for U.S. car imports to South Korea benefit American
automakers.
● South Korean Steel Industry: Exemption from the 25% steel tariff, though with
quotas, prevents harsher economic fallout for South Korea.
● Both Governments: Politically, both sides can claim success—Trump for a tougher
trade stance and South Korea for maintaining agricultural protections.

Potential Losers:

● South Korean Auto Industry: The extension of tariffs on light trucks and symbolic
lifting of car quotas may limit market competitiveness in the U.S.
● U.S. Consumers: Tariffs and quotas could raise prices for imported goods.

Improvement Over 2012 Deal:

● Modest Gains: The 2018 deal addresses specific U.S. concerns, such as the trade
deficit in autos and steel, but its impact is largely symbolic.
● Limited Change: Key sectors like agriculture saw little alteration, leaving some trade
barriers in place.

Overall, the 2018 deal provides incremental changes rather than a fundamental overhaul. It
delivers political wins but has limited economic transformation.

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Chap 7 : Protecting U.S. Magnesium.
Who gains most from the antidumping duties levied by the United States on imports of
magnesium from China and Russia? Who are the losers? Are these duties in the best
national interests of the United States
Who Gains Most from the Antidumping Duties?
1. U.S. Magnesium: As the sole surviving U.S. producer of magnesium, U.S.
Magnesium stands to gain significantly from the antidumping duties. The duties
protect the company from foreign competition, allowing it to maintain higher prices
and potentially increase its market share. The favorable ruling enabled U.S.
Magnesium to invest nearly $50 million in its manufacturing plant and boost its
production capacity by 28%.
2. Employees of U.S. Magnesium: The 400 employees of U.S. Magnesium benefit from
job security as the company is shielded from foreign competition. The protection from
imports helps sustain their employment and potentially allows for job growth within
the company.
3. U.S. Government: The government may benefit politically by supporting domestic
industries and protecting jobs, which can be a popular stance among constituents.

Who Are the Losers?

1. Consumers of Magnesium in the U.S.: The imposition of antidumping duties leads to
higher prices for magnesium in the U.S. market. Consumers, including companies
like Alcoa and those in the automobile industry, face increased costs, which can lead
to higher prices for end products. This may also drive manufacturers to seek
alternatives to magnesium or relocate production to countries with lower material
costs.
2. Foreign Producers: Chinese and Russian magnesium producers are directly
impacted by the duties, as their ability to compete in the U.S. market is severely
restricted. This can lead to reduced sales and potential job losses in those countries.
3. U.S. Industries Dependent on Magnesium: Industries that rely on magnesium for
production, such as automotive and aluminum can manufacturing, may suffer from
increased costs and reduced competitiveness. This could lead to a loss of market
share to foreign competitors in other regions.

Are These Duties in the Best National Interests of the United States?
The answer to whether the antidumping duties are in the best national interests of the United
States is complex and depends on various factors:

● Short-Term Protection vs. Long-Term Consequences: In the short term, the duties
protect U.S. Magnesium and its employees, preserving jobs and allowing the
company to invest in its operations. However, in the long term, higher prices for
magnesium could harm U.S. manufacturers that rely on this material, potentially
leading to job losses in those sectors.
● Market Dynamics: The duties may distort market dynamics by keeping prices
artificially high, which can lead to inefficiencies in the market. If U.S. manufacturers

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 are unable to compete globally due to higher input costs, this could ultimately harm
the U.S. economy.
● Consumer Impact: The increased costs for consumers and industries that use
magnesium could lead to higher prices for goods, which may not be in the best
interest of the overall economy.

In conclusion, while the antidumping duties provide immediate benefits to U.S. Magnesium
and its employees, they may have negative repercussions for consumers and other
industries in the long run. Policymakers must weigh these factors carefully to determine the
overall impact on the national interest.
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Chap 8 : Geely Goes Global

1. Why did Geely acquire Volvo? What are the benefits of acquisition? What are the potential
costs and risks?
Reasons for Acquisition:
● Brand Value: Geely sought to acquire Volvo to leverage its strong brand reputation
for safety and quality, which would enhance Geely's market position.
● Technological Expertise: The acquisition provided access to Volvo's advanced
engineering and design capabilities, which Geely lacked at the time.
● Market Expansion: Owning Volvo allowed Geely to expand its footprint in
international markets, particularly in Europe and North America.
Benefits of Acquisition:
● Synergies: The combination of Geely's manufacturing capabilities with Volvo's design
expertise created operational efficiencies.
● Increased Sales: The acquisition led to a significant increase in Volvo's sales,
particularly in China, where the brand gained popularity.
● Control: Full ownership allowed Geely to implement its strategies without the
limitations of a licensing agreement.
Potential Costs and Risks:
● Cultural Differences: Integrating a Swedish company into a Chinese corporate culture
could lead to management challenges.
● Financial Risk: The $1.8 billion investment was substantial, and any failure to achieve
expected synergies could result in financial losses.
● Market Acceptance: There was skepticism about whether a Chinese company could
successfully manage a prestigious Western brand.
2. The Volvo acquisition allowed Geely to grow its sales in China. Why might an acquisition
have been preferred to simply licensing the brand and know-how from Volvo (assuming that
was an option)?
● Control Over Operations: Acquiring Volvo allowed Geely to have full control over
production, marketing, and distribution, ensuring that the brand's integrity and quality
standards were maintained.
● Long-Term Commitment: An acquisition demonstrates a long-term commitment to the
brand, which can foster consumer trust and loyalty, whereas licensing might be
perceived as a temporary arrangement.

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 ● Access to R&D: Ownership provides direct access to Volvo's research and
development, enabling Geely to innovate and adapt products specifically for the
Chinese market.
● Brand Integration: Full ownership allows for better integration of Volvo's brand into
Geely's overall strategy, enhancing cross-promotion and leveraging synergies.
3. Following the Volvo acquisition, Geely built a new, wholly owned factory to produce Volvo
cars in the United States. Why was a direct investment strategy preferred to other ways of
growing the U.S. market, such as through exporting or licensing the Volvo brand and designs
to another producer?
● Market Presence: Establishing a factory in the U.S. allows Geely to have a direct
presence in one of the largest automotive markets, facilitating better market
understanding and responsiveness to consumer preferences.
● Reduced Tariffs: Manufacturing locally helps avoid tariffs and import duties, making
the vehicles more competitively priced in the U.S. market.
● Job Creation: A local factory creates jobs, which can enhance Geely's reputation and
acceptance in the U.S. market.
● Quality Control: Direct investment allows for better quality control and adherence to
local regulations, ensuring that products meet U.S. standards.
4. What are the benefits of Geely’s investment in South Carolina to the U.S. economy? What
are the potential costs? Do you think it was in the interests of the United States to let this
investment proceed?
Benefits:
● Job Creation: The investment is expected to create thousands of jobs in South
Carolina, contributing to local economic growth.
● Increased Competition: Geely's presence in the U.S. automotive market can enhance
competition, potentially leading to better products and prices for consumers.
● Foreign Direct Investment: The investment represents foreign direct investment
(FDI), which can stimulate economic activity and attract further investments in the
region.
Potential Costs:
● Market Disruption: Increased competition from Geely could disrupt existing U.S.
manufacturers, potentially leading to job losses in those companies.
● Dependency on Foreign Firms: Relying on foreign manufacturers for key products
may raise concerns about national security and economic independence.
Conclusion: Allowing Geely's investment in South Carolina appears to be in the interests of
the United States, as it promotes job creation, economic growth, and increased competition
in the automotive sector. However, it is essential to monitor the long-term impacts on
domestic manufacturers and ensure that the benefits of such investments are maximized for
the local economy.

Chap 8 Burberry Shifts Its Entry Strategy in Japan

a. Why did Burberry initially choose a licensing strategy to expand its presence in Japan?
Burberry initially chose a licensing strategy to expand its presence in Japan for several
reasons:

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 1. Market Entry: Licensing allowed Burberry to enter the Japanese market with lower
risk and investment. By partnering with Sanyo Shokai, a local company with
established market knowledge and distribution channels, Burberry could leverage
their expertise to navigate the complexities of the Japanese retail environment.
2. Revenue Generation: The licensing agreement generated significant revenue for
Burberry, with Sanyo Shokai paying approximately $80 million in annual royalties.
This arrangement provided a steady income stream without the need for Burberry to
invest heavily in infrastructure or operations in Japan.
3. Focus on Core Competencies: By licensing the brand, Burberry could focus on its
core competencies in design and production while leaving the marketing and retail
operations to a local partner who understood consumer preferences and market
dynamics.
4. Rapid Expansion: The licensing model allowed for quicker expansion, as Sanyo
Shokai could open multiple stores without Burberry needing to manage each location
directly.
b. What limitations of licensing became apparent over time? Should Burberry have expected
these drawbacks to arise?
Limitations of Licensing:
1. Brand Dilution: Over time, Burberry realized that the licensing agreement led to brand
dilution. Sanyo Shokai sold a wide range of products at lower price points, which
undermined Burberry's luxury image. The availability of lower-priced items, such as
golf bags and miniskirts, conflicted with Burberry's positioning as a high-end brand.
2. Lack of Control: Burberry had limited control over how its brand was represented and
marketed in Japan. This lack of oversight meant that the brand's image could be
compromised by the licensee's decisions, which did not always align with Burberry's
luxury positioning.
3. Inconsistent Customer Experience: The varied product offerings and pricing
strategies employed by Sanyo Shokai created an inconsistent customer experience,
which could confuse consumers about the true value and exclusivity of the Burberry
brand.
4. Changing Market Dynamics: As consumer behavior shifted, with more customers
purchasing luxury goods online or during trips abroad, Burberry needed to adapt its
strategy to maintain a coherent global brand image.
Should Burberry Have Expected These Drawbacks?: Yes, Burberry should have anticipated
these drawbacks. Licensing agreements often come with inherent risks related to brand
control and image consistency. As a luxury brand, Burberry should have been particularly
aware of the potential for brand dilution and the importance of maintaining a strong, coherent
brand identity in all markets.
c. Was terminating the Japanese licensing agreement and opening wholly owned stores the
correct strategy for Burberry? What are the risks here?
Correctness of the Strategy: Terminating the Japanese licensing agreement and opening
wholly owned stores was a strategic move aimed at regaining control over the brand and its
image. This decision aligns with Burberry's goal of presenting a coherent luxury brand
identity globally. By directly managing its operations in Japan, Burberry can ensure that its
products are marketed and sold in a manner consistent with its high-end positioning.
Benefits of the Strategy:

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 ● Brand Control: Burberry can maintain strict control over product offerings, pricing,
and marketing strategies, ensuring that the brand is represented in a way that aligns
with its luxury image.
● Higher Price Points: By offering only high-end products at significantly higher price
points, Burberry can reinforce its status as a luxury brand and potentially increase
profit margins.
● Improved Customer Experience: Directly operating stores allows Burberry to create a
consistent and high-quality customer experience, which is crucial for luxury brands.
Risks of the Strategy:
● Initial Sales Decline: Burberry anticipates that sales may initially fall as it transitions
from a licensing model to wholly owned stores. This could impact short-term revenue
and profitability.
● High Investment Costs: Establishing wholly owned stores requires significant
investment in infrastructure, staffing, and marketing, which could strain resources.
● Market Acceptance: There is a risk that consumers may not respond positively to the
new pricing strategy or the limited product offerings, especially if they have become
accustomed to the previous lower-priced products.
● Cultural Challenges: Operating in Japan requires an understanding of local consumer
preferences and behaviors. Burberry must ensure that its new stores resonate with
Japanese customers to succeed.
In conclusion, while terminating the licensing agreement and opening wholly owned stores is
a bold and potentially beneficial strategy for Burberry, it comes with inherent risks that the
company must carefully manage to ensure long-term success in the Japanese market.

Chap 9 NAFTA 2.0: The USCMA

1. On balance, do you think that NAFTA has been a net positive or negative for the United
States economy? What about for the economies of Mexico and Canada?
United States:
● Net Positive: NAFTA has generally been viewed as a net positive for the U.S.
economy. It facilitated increased trade among the three countries, leading to a tripling
of trade volume since its inception. This has benefited U.S. consumers through lower
prices and greater variety of goods. Additionally, many industries, particularly
agriculture and services, have seen growth due to expanded access to Canadian and
Mexican markets.
● Job Displacement: However, there have been criticisms regarding job losses in
certain manufacturing sectors, particularly in industries that faced competition from
lower-wage Mexican labor. While some jobs were lost, the overall impact on
employment has been mixed, with many jobs created in other sectors.
Mexico:
● Net Positive: For Mexico, NAFTA has been largely beneficial, leading to increased
foreign direct investment (FDI) and growth in manufacturing, particularly in the
automotive and electronics sectors. It has helped modernize the Mexican economy
and create jobs, although many of these jobs are low-wage and may not provide
adequate living standards.
Canada:

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 ● Net Positive: Canada has also benefited from NAFTA, with increased trade and
investment. The agreement has strengthened economic ties with the U.S. and
Mexico, leading to growth in various sectors, including agriculture, manufacturing,
and services.
2. Why do you think Donald Trump was so focused on renegotiating NAFTA during and after
his successful presidential campaign?
● Perception of Unfairness: Trump campaigned on the belief that NAFTA was unfair to
American workers and manufacturers, claiming it led to job losses and factory
closures. This narrative resonated with many voters in manufacturing-heavy regions
who felt left behind by globalization.
● Trade Deficits: The significant trade deficit with Mexico was a focal point for Trump,
who argued that it indicated a failure of NAFTA and a need for a better deal that
would protect American jobs.
● Nationalism and Protectionism: Trump's administration emphasized an "America
First" approach, prioritizing domestic industries and workers. Renegotiating NAFTA
aligned with this broader agenda of reducing reliance on foreign production and
increasing domestic manufacturing.
● Political Capital: Successfully renegotiating NAFTA was seen as a way to fulfill a key
campaign promise, which could bolster Trump's political capital and appeal to his
base.
3. What is your assessment of the USCMA? What are the potential benefits of this
agreement for the United States? What are the costs? On balance, does this agreement
represent an improvement over NAFTA?
Assessment of the USCMA:
● The USCMA introduces several changes aimed at modernizing trade relations
among the three countries, particularly in the automotive sector and labor standards.
Potential Benefits for the United States:
● Increased Domestic Production: By raising the content threshold for vehicles to
qualify for zero tariffs and mandating higher wages for workers, the USCMA aims to
encourage more automotive production in the U.S. and Canada.
● Strengthened Labor Standards: The agreement includes provisions to improve labor
rights and working conditions, which could lead to better wages and job security for
workers in North America.
● Intellectual Property Protections: The USCMA enhances protections for intellectual
property, which could benefit U.S. companies in technology and pharmaceuticals.
Potential Costs:
● Higher Prices: The increased production costs due to higher wage requirements and
sourcing mandates may lead to higher prices for consumers, particularly in the
automotive sector.
● Disruption of Supply Chains: The new rules could disrupt existing supply chains that
have developed under NAFTA, potentially leading to inefficiencies and increased
costs for manufacturers.
● Short-Term Economic Impact: The transition to the new agreement may result in
short-term economic disruptions as industries adjust to the new rules.
Improvement Over NAFTA:
● On balance, the USCMA can be seen as an improvement over NAFTA in terms of
addressing modern trade issues, labor rights, and environmental standards.

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 However, the effectiveness of these changes will depend on implementation and
enforcement.
4. On balance, is the USCMA good for Canada and Mexico?
Canada:
● Positive Aspects: The USCMA is generally viewed positively in Canada, as it
maintains access to the U.S. market, which is crucial for Canadian exports. The
agreement also includes provisions that protect Canadian dairy and poultry farmers,
which is a significant benefit for those sectors.
● Challenges: However, there are concerns about the increased pressure on Canadian
industries to comply with U.S. standards and the potential for higher prices for
consumers.
Mexico:
● Positive Aspects: For Mexico, the USCMA aims to improve labor standards and
working conditions, which could lead to better wages for workers. The agreement
also seeks to maintain trade flows with the U.S. and Canada, which are vital for the
Mexican economy.
● Challenges: Nonetheless, there are concerns about the impact of the new labor
provisions on Mexican manufacturers, as they may face increased costs and
pressure to raise wages. Additionally, the requirement for a higher percentage of auto
parts to be sourced from high-wage factories could affect Mexico's competitive
advantage in the automotive sector.

Chap 13: Red Bull: A Leader in International Strategy

1. As an Austrian–Thai company, Red Bull has done a remarkable job of positioning itself
internationally by coming across as a local company in every country where Red Bull is sold.
Would you be more or less likely to buy Red Bull knowing the brand is Austrian but with a
strong Thai influence? Does it generally matter to consumers where a product originates
from?
Personal Preference:
● Less Likely to Buy: Knowing that Red Bull is an Austrian–Thai company might not
significantly impact my decision to purchase the product. However, some consumers
may have preferences for products from certain countries based on perceptions of
quality, safety, or brand reputation. For instance, Austrian products might be
associated with high quality, while Thai influence could evoke thoughts of exoticism
or unique flavors.
Consumer Perception:
● Origin Matters: For many consumers, the origin of a product can influence their
purchasing decisions. Factors such as national pride, perceived quality, and cultural
associations can play a role. For example, products from countries known for their
craftsmanship or innovation may be favored over others.
● Globalization: In a globalized market, consumers are increasingly open to products
from various origins, especially if the brand successfully localizes its marketing and
resonates with local culture. Red Bull's ability to position itself as a local brand in
different markets may mitigate any negative perceptions associated with its Austrian
or Thai origins.
2. Worldwide, Red Bull has the highest market share of all energy drinks, with more than 6
billion cans sold annually (that’s almost one can for every person worldwide). So, either you

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drink Red Bull, or your friend does! Does the sheer number of Red Bull cans sold—basically
its popularity—make you more or less interested in supporting the product with your
purchase?
Impact of Popularity:
● Increased Interest: The sheer volume of Red Bull cans sold can enhance my interest
in the product. Popularity often signals quality and reliability, leading consumers to
believe that if so many people are buying it, there must be something appealing
about it. This can create a bandwagon effect, where consumers are more likely to try
or continue purchasing a product that is widely accepted and enjoyed by others.
Social Proof:
● Social Influence: The idea that "everyone is drinking it" can create a sense of
community or belonging, making me more inclined to support the product. If friends
or peers consume Red Bull, it may influence my decision to purchase it as well, as I
may want to share in the experience or feel part of the group.
3. Red Bull mass markets its products in a unique way. To support the company’s
international business strategy, Red Bull hosts a number of extreme sporting events.
Personally, how reachable are you as a customer via these extreme sporting events, or does
it even matter? Some marketers believe that just knowing the “brand myth” and Red Bull
“legend” is enough to make people buy the product. Do you agree or no, and why?
Reachability via Events:
● Limited Reach: Personally, I may not feel directly reachable through extreme sporting
events, especially if I am not an enthusiast of those sports or if the events are not
easily accessible to me. However, the events can create a strong brand presence
and awareness, which can influence my perception of the brand even if I do not
attend them.
Brand Myth and Legend:
● Importance of Brand Myth: I agree that the "brand myth" and the legend surrounding
Red Bull play a significant role in its marketing success. The narrative of adventure,
risk-taking, and extreme sports aligns with the lifestyle aspirations of many
consumers, making the brand more appealing. This storytelling aspect can create an
emotional connection with consumers, leading them to purchase the product even if
they do not participate in the events.
Cultural Relevance:
● Cultural Resonance: The effectiveness of this strategy may vary by demographic and
cultural context. For some consumers, the association with extreme sports and the
adventurous lifestyle may resonate deeply, while for others, it may not hold as much
significance. Ultimately, the combination of event marketing and the brand's narrative
can create a powerful marketing strategy that appeals to a broad audience.

Chap 13: AB InBev, Beer Globally, and Creating Value

a. With more than 200 brands and strong coverage internationally of the different brands,
strategically AB InBev is a unique and highly organized global company. Do they have too
many brands? Why or why not?
No. AB InBev’s large brand portfolio allows them to cater to diverse markets and consumer
preferences worldwide, giving them a strong local and global presence. By focusing
resources on the most promising brands while retaining others for local market strength, they
maintain flexibility and resilience in the competitive global beer market.

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b. The company follows a focused brands strategy in which the majority of the resources are
devoted to those brands that have the greatest long-term growth potential. What positives
and negatives do you see with this approach?
AB InBev’s focused brands strategy allows it to allocate resources efficiently, investing in
brands with the highest growth potential to maximize returns. This concentration of effort
bolsters the identity and loyalty of key brands, like Budweiser and Corona, building strong
global recognition. Additionally, the streamlined focus simplifies decision-making, enabling a
cohesive strategy across regions, which contributes to higher margins and profitability.
However, this approach can lead to the neglect of smaller or local brands, potentially
reducing their market share and weakening AB InBev’s hold on niche markets. There’s also
a risk of over-dependence on a few key brands; if consumer preferences shift, AB InBev’s
growth could be impacted. Limited investment in smaller brands may stifle innovation,
preventing the company from capturing trends, such as the rise of craft beers. Furthermore,
heavy focus on global brands could lead to market saturation, making it harder to drive
growth without expanding attention to other brands.
c. Strategically, AB InBev has 10 principles driving everything they do. At the core, AB InBev
is focused on a shared dream that energizes everyone to work in the same direction to be
the best beer company in the world, bring people together, and create a better world.
Additional principles cover people strengths, quality of teams, striving for increased
satisfaction, consumer focus, ownership, common sense and simplicity, cost management,
leadership, and hard work and responsibility. Should large multinational corporations really
be built on strong principles, or do they need a more flexible structure?
Large multinational corporations benefit from being built on strong principles, as these
provide a clear foundation for consistent decision-making and behavior across diverse
regions. In AB InBev’s case, principles like consumer focus, leadership, and cost
management help create a unified vision, encouraging all employees, regardless of location,
to work toward shared goals. This cohesion can lead to increased employee loyalty, stronger
brand identity, and predictable business outcomes, which are vital in managing a company
as expansive as AB InBev.
However, a certain level of flexibility is also essential for success. Operating in varied
markets requires adapting to local cultures, consumer preferences, and regulatory
environments. If a multinational corporation adheres too rigidly to its principles without
flexibility, it risks missing opportunities for innovation or alienating local markets. Thus, a
blend of strong guiding principles with adaptability is key for large multinationals like AB
InBev to thrive in a dynamic global landscape.

Chap 14: Walmart International (closing case) - tr463

1. As one of the largest companies in the world, Walmart has a reasonably limited
international exposure—only 28 countries. What do you think Walmart can do to have a
broader platform in more of the world’s 195 countries?
Strategies for Broader International Exposure:
● Market Research and Entry Strategy: Walmart should conduct thorough market
research to identify emerging markets with high growth potential. This includes
understanding local consumer preferences, regulatory environments, and competitive
landscapes. Based on this research, Walmart can develop tailored entry strategies,
such as joint ventures, partnerships, or acquisitions, to establish a presence in new
countries.

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 ● Localized Offerings: To appeal to diverse markets, Walmart should focus on
localizing its product offerings and store formats. This could involve adapting
merchandise to meet local tastes and preferences, which would enhance customer
acceptance and loyalty.
● E-commerce Expansion: Investing in e-commerce platforms and digital marketing
can help Walmart reach consumers in countries where physical stores may not be
feasible. By leveraging technology, Walmart can tap into the growing trend of online
shopping, especially in regions with high internet penetration.
● Sustainability and Social Responsibility: Emphasizing sustainability and corporate
social responsibility can enhance Walmart's brand image and acceptance in new
markets. Engaging in community development and environmentally friendly practices
can resonate well with consumers and governments alike.
● Strategic Alliances: Forming strategic alliances with local retailers or suppliers can
facilitate market entry and provide valuable insights into local business practices and
consumer behavior.
2. Walmart operates via a number of brands around the world (e.g., Asda in the United
Kingdom). Many companies are becoming more standardized in their operations and have
adopted organizational structures to support such standardization. Can Walmart adopt a
more effective global strategy and, if so, what type of organizational structure should the
company create to best serve its operations in the global marketplace?
Adopting a More Effective Global Strategy:
● Transnational Strategy: Walmart could adopt a transnational strategy that balances
global efficiency with local responsiveness. This would involve standardizing certain
core processes (like supply chain management) while allowing flexibility in
merchandising and marketing to cater to local markets.
Recommended Organizational Structure:
● Matrix Structure: Implementing a matrix organizational structure could enhance
collaboration between global and local teams. This structure would allow for dual
reporting lines—one for global functions (like sourcing and logistics) and another for
local operations (like marketing and sales). This would facilitate knowledge sharing
and best practices while ensuring that local teams have the autonomy to make
decisions that align with regional consumer preferences.
● Regional Divisions: Establishing regional divisions with dedicated leadership could
help Walmart better address the unique challenges and opportunities in different
parts of the world. Each region could have its own strategy while still aligning with
Walmart's overall corporate goals.
3. Walmart Stores Chief Operating Officer Judith McKenna was named president and CEO
of the company’s international unit effective February 1, 2018. The role is seen as a stepping
stone to the top job at the world’s largest retailer, with current CEO Doug McMillon and his
predecessor Mike Duke having run the international unit previously. If international is such
an important part of the company, what can Walmart do, should do, or must do to leverage
its position as the largest retailer in the world?
Actions for Leveraging International Position:
● Invest in Technology and Innovation: Walmart should continue to invest in technology
to enhance its supply chain, improve customer experience, and streamline
operations. This includes adopting advanced analytics, artificial intelligence, and
automation to optimize inventory management and personalize customer
interactions.

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 ● Focus on Emerging Markets: Walmart must prioritize expansion into emerging
markets where there is significant growth potential. This includes tailoring strategies
to meet the unique needs of consumers in these markets, such as offering affordable
products and enhancing accessibility.
● Enhance Global Sourcing: Walmart should work towards developing a more efficient
global sourcing strategy that leverages its purchasing power while allowing for local
adaptations. This could involve establishing regional sourcing offices that can
negotiate with suppliers while ensuring compliance with local regulations and
standards.
● Strengthen Brand Positioning: Walmart must continue to build its brand as a leader in
value and convenience. This can be achieved through effective marketing campaigns
that resonate with local consumers and highlight Walmart's commitment to quality
and affordability.
● Sustainability Initiatives: Emphasizing sustainability and ethical sourcing can
enhance Walmart's reputation globally. The company should set ambitious
sustainability goals and transparently report on progress, which can attract
environmentally conscious consumers and investors.
● Employee Development and Engagement: Investing in employee training and
development, particularly in international markets, can enhance operational
effectiveness and customer service. Engaged employees are more likely to
contribute positively to the company's culture and performance.
By implementing these strategies, Walmart can leverage its position as the largest retailer in
the world to drive growth and enhance its competitive advantage in the global marketplace.

Chap 14: Management Focus on Lincoln Electric

a. To what extent is the organizational culture of Lincoln Electric aligned with the
firm’s strategy?

The organizational culture of Lincoln Electric is highly aligned with its strategy, particularly in
the United States. Lincoln Electric’s culture emphasizes individual productivity, merit-based
rewards, and egalitarian principles, which directly supports its strategy of achieving low costs
through exceptionally high productivity. The company’s piecework and merit-based bonus
system incentivizes workers to focus on both output quantity and quality, aligning employees'
goals with the firm's objectives of efficiency and excellence. Additionally, James Lincoln's
commitment to open communication and treating all employees equally fostered an
environment where everyone felt valued, motivated, and rewarded for hard work, further
reinforcing productivity and cost control.

However, this alignment falters in Lincoln’s international operations, where the same
incentive-based culture often clashes with local norms and labor laws. In the U.S., the
individualistic culture supports the high-performance expectations and rewards structure that
Lincoln’s strategy depends on. But in many international markets, local culture values
collective over individual rewards, and leisure over financial incentive, which makes Lincoln’s
approach less effective and even resisted. Consequently, Lincoln's inability to adapt its
culture to align with local conditions abroad weakened the alignment between culture and

36
strategy, limiting the success of its expansion efforts and hindering its overall global
performance.

b. How was the culture at Lincoln Electric created and nurtured over time?

The culture at Lincoln Electric was established by its founder, James Lincoln, who believed
in the potential of individuals to achieve remarkable productivity when correctly motivated.
This belief drove him to create a meritocratic environment, where employees were rewarded
for their individual efforts. His respect for individual capability and emphasis on
egalitarianism laid the foundation for Lincoln’s unique culture. He removed hierarchical
barriers, such as designating all employees to dine in the same cafeteria and avoiding
reserved parking for managers. This created a workplace that felt inclusive, respected, and
aligned with his vision of fair treatment and open communication.

To nurture this culture, Lincoln implemented a piecework compensation system, where

employees earned income based on output, along with a semiannual merit-based bonus.
These systems reinforced productivity and accountability, aligning individual goals with
company objectives. Workers took ownership of quality, as defects reduced pay and had to
be fixed before receiving compensation. Over time, this led to a highly productive workforce
that enjoyed higher pay than average manufacturing workers in their area.

Lincoln’s culture was further strengthened by sharing productivity gains: employees earned
higher wages, customers benefited from lower prices, and shareholders received higher
dividends. This cultural model of incentivizing individual effort and productivity was sustained
across generations, making Lincoln Electric one of the most productive manufacturing firms
in the industry.

c. Why did Lincoln Electric’s culture and incentive systems work well in the United
States? Why did it not take in other nations?

Lincoln Electric’s culture and incentive systems worked well in the United States due to
several cultural and legal factors that aligned with its values and practices. The company’s
core philosophy is rooted in individualism, meritocracy, and productivity-based rewards,
which strongly resonate with the American cultural values of independence, hard work, and
financial motivation. The U.S. generally encourages individual achievement, and workers
there often value higher earnings and are motivated by performance-linked compensation.
Additionally, the United States’ flexible labor laws and minimal union constraints facilitated
Lincoln’s use of a piecework pay system and merit-based incentives, allowing it to reward
productivity directly and sustain a culture of high performance and accountability.

However, this culture did not translate successfully to other nations, primarily due to
differences in cultural attitudes, labor laws, and worker expectations. In many European and
Latin American countries, workplace culture places a higher value on work-life balance,
collective well-being, and job security over individual financial incentives. For instance, in
Germany, piecework was illegal, and in Brazil, legally, a bonus provided for over two years
would become a permanent entitlement—both making Lincoln’s incentive system
challenging to implement as designed. Additionally, unionized workplaces in these regions
were resistant to the piecework approach, viewing it as exploitative and incompatible with
their collective bargaining norms.

37
Moreover, many European workers preferred additional leisure time over increased income
and resisted the high productivity expectations associated with Lincoln’s model. The
acquired companies in these regions had established cultures that clashed with Lincoln’s
emphasis on individual-based incentives and high-intensity work environments, further
complicating efforts to introduce the company’s U.S.-based culture abroad. This
misalignment between Lincoln’s incentive structure and foreign cultural, legal, and labor
contexts ultimately hindered the success of its productivity-based model outside the United
States.

Chap 15: IKEA Entering India, Finally! (closing case)

1. Did IKEA enter India too late in its evolution? The company started in 1943 and was
already in 50 countries. Should operations in India have started sooner? If you could decide
for them, what other country markets would you have IKEA enter, and why?
Assessment of Timing:
● Late Entry: While some may argue that IKEA's entry into India in 2018 was late, it is
essential to consider the complexities of entering a market like India. The company
needed to conduct extensive research to understand local consumer preferences,
cultural nuances, and market dynamics. Given the size and diversity of the Indian
market, a well-planned entry strategy was crucial for long-term success.
● Market Readiness: The delay allowed IKEA to prepare adequately, ensuring that its
offerings were tailored to Indian consumers. This preparation included understanding
the local aesthetic, family dynamics, and preferences for color and furniture usage.
Entering too early without this understanding could have led to failure.
Alternative Markets:
● Other Emerging Markets: If I could decide for IKEA, I would recommend entering
other emerging markets with growing middle classes and urbanization trends, such
as:
● Indonesia: With a large population and increasing disposable income,
Indonesia presents a significant opportunity for IKEA. The growing urban
centers and demand for affordable home furnishings align well with IKEA's
business model.
● Nigeria: As Africa's largest economy, Nigeria has a burgeoning middle class
and a youthful population. Entering this market could position IKEA as a
leader in home furnishings in West Africa.
● Vietnam: With rapid economic growth and urbanization, Vietnam is becoming
an attractive market for international retailers. The younger population is
increasingly interested in modern home furnishings.
2. To prepare Indian customers’ mindsets before IKEA opened its first store in 2018, the
company unwrapped its first experiential center IKEA Hej (Hello) Home close to the IT hub of
Hyderabad as a way to ingratiate Hyderabad customers into the IKEA model. How can this
experiential model be used in other countries?
Utilizing the Experiential Model:
● Cultural Adaptation: The experiential model can be adapted to different cultural
contexts by incorporating local design elements, traditions, and consumer behaviors.

38
 For example, in countries where family gatherings are central, IKEA could create
spaces that showcase how their products can enhance communal living.
● Interactive Workshops: IKEA can host workshops in these experiential centers,
teaching customers how to assemble furniture, decorate their homes, or utilize space
efficiently. This hands-on approach can demystify the DIY aspect of IKEA and
encourage participation.
● Local Partnerships: Collaborating with local influencers, designers, or home
improvement experts can help tailor the experience to resonate with local
consumers. These partnerships can also enhance credibility and attract foot traffic.
● Pop-Up Stores: In addition to permanent experiential centers, IKEA could consider
pop-up stores in various cities to test the market and gather feedback. These
temporary installations can create buzz and allow IKEA to gauge consumer interest
before committing to a full-scale store.
● Community Engagement: Engaging with local communities through events,
sponsorships, or collaborations with local artisans can help build brand loyalty and
create a positive image. This approach can also provide insights into consumer
preferences.
3. Entry into India has been a fascinating journey for IKEA, and a deviation from its normal
Swedish-aligned business practices. Should IKEA become less Swedish when entering new
international markets, as they did in India, or should IKEA stay Swedish as much as
possible?
Balancing Swedish Identity with Local Adaptation:
● Cultural Sensitivity: While IKEA should maintain its core values and brand identity, it
is essential to adapt to local cultures and consumer preferences. This does not mean
abandoning its Swedish roots but rather finding a balance between global
consistency and local relevance.
● Brand Integrity: IKEA's Swedish identity is a significant part of its brand equity,
associated with quality, design, and innovation. Completely abandoning this identity
could dilute the brand and alienate existing customers who value these attributes.
● Localized Offerings: IKEA can introduce localized products that reflect the tastes and
preferences of the local market while still adhering to its design principles. For
example, incorporating local materials or styles into product lines can enhance
appeal without compromising brand identity.
● Flexibility in Operations: IKEA should remain flexible in its operational practices,
allowing for variations in store layouts, product offerings, and marketing strategies
based on local insights. This flexibility can help the brand resonate more deeply with
consumers in different markets.
● Learning from Experience: The experience in India can serve as a model for future
market entries. By understanding the importance of local adaptation while retaining
core brand values, IKEA can successfully navigate diverse markets without losing its
identity.
In conclusion, IKEA should strive to maintain its Swedish identity while being open to local
adaptations that enhance its relevance in new markets. This approach can help the
company build a strong global brand that resonates with consumers worldwide.

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Chap 15: TESCO
a. Why did Tesco’s initial international expansion strategy focus on developing nations?
Tesco's initial international expansion strategy focused on developing nations for several
reasons:
1. Market Potential: Developing nations, particularly in Eastern Europe and Asia,
presented significant growth opportunities due to their emerging economies. These
markets often had rising disposable incomes and a growing middle class, which
increased demand for retail goods.
2. Limited Competition: In many developing markets, Tesco identified a lack of strong
local competitors. This allowed Tesco to establish a foothold without facing the
intense competition that characterized more mature markets like North America and
Western Europe.
3. Strategic Investment: Tesco had strong cash flows from its operations in the UK,
which provided the financial resources necessary to invest in new markets. The
company sought to leverage these resources in regions where it could achieve rapid
growth and market leadership.
4. Learning and Adaptation: Entering developing markets allowed Tesco to learn and
adapt its business model in diverse environments, which could be beneficial for
future expansions.
b. How does Tesco create value in its international operations?
Tesco creates value in its international operations through several key strategies:
1. Transfer of Core Competencies: Tesco leverages its strong competencies in
marketing, logistics, inventory management, and private label product offerings. By
transferring these capabilities to its international operations, Tesco can enhance
efficiency and customer satisfaction.
2. Local Adaptation: While Tesco maintains its core business practices, it adapts its
offerings to meet local consumer preferences. This includes tailoring product
assortments, store formats, and marketing strategies to align with local cultures and
shopping habits.
3. Joint Ventures and Partnerships: By entering into joint ventures with local partners,
Tesco gains valuable insights into local markets and consumer behavior. This
collaboration allows Tesco to combine its financial strength and retailing expertise
with the local partner's market knowledge.
4. Focus on Growth Markets: Tesco targets markets with strong growth potential and
limited competition, allowing it to establish a dominant position and generate
significant sales.
5. Operational Efficiency: Tesco's emphasis on logistics and supply chain management
helps reduce costs and improve service levels, contributing to overall profitability in
its international operations.
c. In Asia, Tesco has a history of entering into joint-venture agreements with local partners.
What are the benefits of doing this for Tesco? What are the risks? How are those risks
mitigated?
Benefits of Joint Ventures:
1. Local Market Knowledge: Partnering with local firms provides Tesco with insights into
consumer preferences, regulatory environments, and cultural nuances, which can
enhance the chances of success in new markets.

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 2. Shared Resources: Joint ventures allow Tesco to share the financial burden and
operational risks associated with entering new markets. This can lead to more
sustainable growth.
3. Faster Market Entry: Collaborating with established local partners can facilitate
quicker entry into the market, as these partners often have existing infrastructure and
customer bases.
4. Increased Credibility: Associating with reputable local firms can enhance Tesco's
credibility and brand acceptance among local consumers.
Risks of Joint Ventures:
1. Control Issues: Sharing ownership and decision-making can lead to conflicts
between partners, particularly if their goals and management styles differ.
2. Profit Sharing: Tesco may have to share profits with its partners, which can reduce
overall profitability compared to wholly-owned operations.
3. Dependency on Partners: Relying on local partners for market knowledge and
operations can create vulnerabilities if the partner underperforms or if the partnership
dissolves.
Risk Mitigation Strategies:
1. Gradual Ownership Increase: Tesco often starts with a minority stake in joint ventures
and gradually increases its ownership as the business stabilizes and grows. This
allows Tesco to maintain some control while learning from the partner.
2. Clear Agreements: Establishing clear contractual agreements that outline roles,
responsibilities, and profit-sharing arrangements can help mitigate conflicts and
ensure alignment of interests.
3. Regular Communication: Maintaining open lines of communication with local partners
can help address issues as they arise and foster a collaborative working relationship.
4. Performance Monitoring: Tesco can implement performance metrics to monitor the
success of the joint venture and make adjustments as needed to ensure alignment
with strategic goals.
d. Tesco’s entry into the United States represented a departure from its historic strategy of
focusing on developing nations. Why do you think Tesco made this decision? How is the
U.S. market different from other markets that Tesco has entered?
Reasons for Entering the U.S. Market:
1. Market Size and Potential: The U.S. is one of the largest retail markets in the world,
offering significant revenue potential. Tesco likely saw an opportunity to capture a
share of this lucrative market.
2. Diversification: Expanding into the U.S. allowed Tesco to diversify its international
portfolio, reducing reliance on specific regions and spreading risk across different
markets.
3. ** Strategic Growth**: Entering the U.S. market was part of Tesco's broader strategy
to become a global player in the retail sector. By establishing a presence in the U.S.,
Tesco aimed to enhance its brand recognition and competitive positioning on a global
scale.
Differences in the U.S. Market:
1. Intense Competition: The U.S. retail market is characterized by strong competition
from established players like Walmart, Kroger, and Target. This competitive
landscape posed challenges that were less prevalent in the developing markets
Tesco had previously targeted.

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 2. Consumer Preferences: U.S. consumers have distinct shopping habits and
preferences compared to those in developing nations. For instance, the emphasis on
convenience, online shopping, and brand loyalty can differ significantly, requiring
Tesco to adapt its business model accordingly.
3. Regulatory Environment: The regulatory framework in the U.S. can be more complex,
with various federal, state, and local regulations impacting retail operations. Tesco
had to navigate these regulations, which may not have been as challenging in the
developing markets.
4. Cultural Differences: The cultural context in the U.S. differs from that of many
developing nations. Understanding local customs, values, and shopping behaviors
was crucial for Tesco's success in this market.
In summary, Tesco's decision to enter the U.S. market represented a strategic shift aimed at
capitalizing on the market's size and potential, despite the challenges posed by intense
competition and differing consumer preferences.

Chap 17: Procter & Gamble Remakes Its Global Supply Chains (closing
case)
1. P&G is the world’s leading manufacturer of consumer products, but most customers do
not really know the P&G brand. Does that matter, or should P&G brand more of their
products under the P&G brand (instead of Bounty, Crest, Tide, and so on)?
P&G's strategy of focusing on product-specific branding (e.g., Bounty, Crest, Tide) rather
than corporate branding has been successful for several reasons:
● Brand Equity: Each product brand is a leader in its category, and customers trust
these brands independently of P&G.
● Market Segmentation: Different brands allow P&G to cater to diverse customer needs
and preferences without diluting the brand identity.
● Competitive Advantage: Focusing on product-specific branding minimizes risk if one
brand faces challenges—it doesn’t affect the overall perception of P&G.
However, increased visibility of the P&G brand might offer advantages:
● Corporate Reputation: Highlighting the P&G name could reinforce trust across all
product categories.
● Sustainability and Ethics Messaging: P&G can leverage its global initiatives and
sustainable practices to appeal to conscious consumers under a unified corporate
banner.
Recommendation: P&G should maintain its product-centric branding but selectively promote
the corporate brand, particularly in corporate social responsibility (CSR) campaigns or
innovations that apply across its portfolio.

2. Considering P&G’s massive product portfolio and the company’s enormous size, what
global supply chain efficiencies do you think P&G has that other companies cannot match
given the size and scope of P&G?
P&G’s size and global scale give it supply chain advantages that smaller competitors or
SMEs cannot easily replicate:
● Global Supplier Network: With 70,000 suppliers worldwide, P&G can source
materials efficiently and ensure redundancy to minimize disruptions.

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 ● Strategic Supplier Relationships: Collaborating with core strategic suppliers allows
P&G to optimize cost, quality, and innovation across the supply chain.
● Technology and Transparency: End-to-end supply chain transparency enables
real-time monitoring and agile decision-making, reducing lead times and inventory
costs.
● Economies of Scale: Large production volumes help P&G negotiate better pricing for
raw materials, packaging, and logistics services.
● Integrated Logistics: P&G’s redesigned distribution network enables it to replenish
80% of retail orders in less than a day, setting a high bar for responsiveness.
● Synergy Across Product Lines: Leveraging common components, packaging, and
distribution networks for multiple brands maximizes efficiency.
These efficiencies provide P&G with cost advantages and a faster response to market
changes, which SMEs or new competitors may struggle to replicate without similar
infrastructure.

3. Given P&G’s focus on synergy and supplier part- nerships, how many of P&G’s suppliers
do you think should be labeled strategic, and how many should be considered just
transactional relation- ships, and why?
Given P&G’s focus on synergy and strategic partnerships, only a small percentage of its
70,000 suppliers should be considered strategic:
● Strategic Suppliers (Core Suppliers):
○ Definition: These suppliers are critical to P&G’s operations, provide unique or
high-value materials or services, or are deeply integrated into the supply
chain.
○ Proportion: Likely around 5-10% of suppliers (approximately 3,500–7,000).
These include chemical and packaging companies like Dow Chemicals or
Diamond Packaging, which play an essential role in product quality and
innovation.
○ Rationale: Strategic partnerships maximize collaboration, innovation, and
mutual growth, which align with P&G’s focus on synergy.
● Transactional Suppliers:
○ Definition: These suppliers provide more commoditized goods or services that
can be sourced from multiple vendors with little differentiation.
○ Proportion: The remaining 90-95% of suppliers.
○ Rationale: Maintaining a large base of transactional suppliers provides cost
competition and flexibility for less critical inputs, such as janitorial or indirect
services.

Chap 17: IKEA Production in China

a. What are the benefits to IKEA of shifting so much of its global production to China?
1. Cost Efficiency: One of the primary benefits of shifting production to China is the
significant cost savings associated with lower labor costs. This allows IKEA to
maintain its commitment to offering well-designed, functional home furnishings at
affordable prices.
2. Scalability: China has a vast manufacturing infrastructure that can easily scale up
production to meet increasing demand. This flexibility is crucial for IKEA, especially
as it expands its market presence in Asia.

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 3. Proximity to Key Markets: By establishing manufacturing facilities in China, IKEA can
reduce lead times and transportation costs for products destined for Asian markets.
This proximity allows for quicker response times to market demands and trends.
4. Access to Local Suppliers: With around 300 local suppliers, IKEA can benefit from a
robust supply chain that enhances its ability to source materials and components
efficiently. This local sourcing can also lead to improved quality control and
innovation.
5. Market Expansion: As IKEA continues to expand its presence in Asia, having
production facilities in China supports its growth strategy in the region. It allows the
company to cater to local tastes and preferences more effectively.
6. Investment in Technology and Innovation: Manufacturing in China provides IKEA with
opportunities to invest in advanced manufacturing technologies and processes,
which can enhance productivity and product quality.
b. What are the risks associated with a heavy concentration of manufacturing assets in
China?
1. Geopolitical Risks: The concentration of manufacturing in China exposes IKEA to
geopolitical tensions, trade disputes, and tariffs that could disrupt operations and
increase costs.
2. Supply Chain Vulnerability: Relying heavily on a single country for production can
create vulnerabilities in the supply chain. Natural disasters, labor strikes, or other
disruptions in China could significantly impact IKEA's ability to deliver products.
3. Quality Control Issues: While local suppliers can enhance efficiency, there is a risk of
inconsistent quality if not managed properly. Ensuring that all suppliers meet IKEA's
quality standards can be challenging.
4. Labor Issues: Changes in labor laws, wage increases, or labor shortages in China
could affect production costs and availability. Additionally, there may be reputational
risks associated with labor practices in the region.
5. Environmental Regulations: Increasingly stringent environmental regulations in China
could lead to higher compliance costs or necessitate changes in production
processes, impacting profitability.
6. Market Saturation: As more companies move production to China, the market may
become saturated, leading to increased competition for resources and potentially
driving up costs.
c. What strategies might IKEA adopt to maximize the benefits and mitigate the risks
associated with moving so much product?
1. Diversification of Manufacturing Locations: To mitigate risks associated with
over-reliance on China, IKEA could diversify its manufacturing footprint by
establishing production facilities in other countries, such as Vietnam, India, or
Eastern European nations. This would reduce vulnerability to disruptions in any
single location.
2. Strengthening Supplier Relationships: Building strong relationships with local
suppliers can enhance collaboration and quality control. IKEA can invest in training
and development programs for suppliers to ensure they meet the company's
standards.
3. Robust Risk Management: Implementing a comprehensive risk management strategy
that includes monitoring geopolitical developments, supply chain vulnerabilities, and
labor conditions can help IKEA proactively address potential issues.

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 4. Investment in Technology: Investing in advanced manufacturing technologies, such
as automation and data analytics, can improve efficiency and quality control. This
can also help IKEA respond more quickly to changes in demand.
5. Sustainability Initiatives: Emphasizing sustainability in production processes can help
mitigate reputational risks and align with consumer preferences for environmentally
friendly products. This includes ensuring compliance with environmental regulations
and adopting sustainable sourcing practices.
6. Agile Supply Chain Management: Developing an agile supply chain that can quickly
adapt to changes in demand or disruptions can enhance resilience. This may involve
implementing just-in-time inventory practices and leveraging technology for real-time
tracking and forecasting.
7. Continuous Market Research: Conducting ongoing market research to understand
consumer preferences and trends in different regions can help IKEA tailor its
products and marketing strategies effectively, ensuring relevance in diverse markets.
By adopting these strategies, IKEA can maximize the benefits of its production in China
while effectively mitigating the associated risks, ensuring sustainable growth and
competitiveness in the global market.

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